Natural Resources committee  I am not a specialist in the production of gas in Quebec or anywhere in Canada, but I will try to answer the question the best I can. Regarding this new source of natural gas, I think it is of relatively the same nature as what is going on in Alberta right now with the oil sands with regard to its potential effect on the rest of the economy in terms of stimulating productivity growth, simply because most of the expenditures are not offshore, as they are in Newfoundland.

Natural Resources committee  Absolutely. There could be various spillovers.

Natural Resources committee  Yes.

Natural Resources committee  No, there is a very strong correlation. I have myself estimated that around 50% of the evolution of the Canadian dollar is driven by the evolution of the price of natural resources, mainly oil and other energy sources. It is a well-accepted fact. It is even accepted by the Bank of Canada.

Natural Resources committee  Yes, exactly. What Mr. Krugman means is that in order to have a manufacturing sector in any country, a number of fixed costs must already be covered. Research and development need to be done and an international market needs to be developed. Once that sector shrinks or contracts because the national currency has appreciated, it is possible that the sector will be gone for good.

Natural Resources committee  The Canadian manufacturing sector that is exporting to the rest of the world is very concentrated in the Quebec-Windsor corridor. The rest of the manufacturing sector in Canada is intimately related to the natural resource industry. Consequently, it is supplying inputs to the natural resource industry and will generally benefit from an oil boom.

Natural Resources committee  Approximately 90% of the jobs lost during that period were lost in Ontario and Quebec, with about two-thirds of them lost in Ontario and one-third in Quebec.

Natural Resources committee  That's right. Equalization has redistributed part of the surplus revenue the federal government has brought in with the oil and gas boom, but there have also been some job losses in the manufacturing sector mainly in Ontario and Quebec, of course.

Natural Resources committee  Yes. Canada exports more natural resources that it imports. Therefore, when there is a natural resource boom or an increase in the price of natural resources, this increases the value of our exports, which automatically increases the value of the Canadian dollar. Note that this increase in the value of the Canadian dollar helps stabilize the resources sector, because when the price of oil goes up from $60 to $80 and the Canadian dollar increases at the same time, oil revenues—in Canadian dollars in Canada—are stabilized.

Natural Resources committee  That needs a much more stable currency.

Natural Resources committee  I do not think that shale gas production in Canada will lead to an increase in the value of the Canadian dollar the same way that oil production has. The reason for that is because the profit, the surplus over the price on production costs, is much lower in the case of shale gas.

Natural Resources committee  The big difference, as you pointed out, between 1960 and today is that we have much more movement of capital today than we had in the 1960s. But capital does not play an important role in the Dutch disease mechanism. The mechanism was operating probably in the 16th century, 50 years ago, and it is operating now and it will in the future.

Natural Resources committee  Thank you. It took the English-speaking economic community in Canada over ten years to properly pronounce my name. It was not easy. In the few minutes I have here today, I would like to address two subjects. The first is the issue known as Dutch disease, in the Canadian context.